Laura Smolowe Speaks with CFO Brew on the Lack of a “One-Size-Fits-All” Approach to the FTC’s Noncompete Ban

Munger, Tolles & Olson partner Laura Smolowe spoke with CFO Brew about the Federal Trade Commission’s (FTC) ban on non-compete agreements in an article titled, “The CFO’s Primer on the FTC’s (Attempted, Thwarted, Maybe Dead) Noncompete Ban.” The discussion follows a Texas court’s ruling which held that the FTC’s agency action was unlawful and prohibited its enforcement nationwide.

Ms. Smolowe noted a growing skepticism towards non-competes at the state level, but also makes clear that many states still allow them under certain conditions. “I do see a trend with increasing skepticism [about] non-competes at the state level, but there are still plenty of states where they are legal, or they are legal in certain situations with sufficiently limited scope,” she continued. States like Pennsylvania and Florida have contested the FTC’s final rule. While some states, including Minnesota, Oklahoma, California and North Dakota, have enacted outright bans on non-competes, the regulation largely remains state-specific, leading to varied enforcement across the country.

Despite the ruling, the agency is considering an appeal. “We don’t know what’s going to happen yet, is the bottom line, but I would personally be surprised if we didn’t see an appeal, and it’s certainly the kind of issue that could get to the Supreme Court,” Ms. Smolowe said.

For CFOs and senior executives, this evolving landscape means they must carefully navigate the legality of non-competes based on state laws and specific contract terms. Ms. Smolowe advises consulting legal counsel to understand the implications in their respective states, stressing that the situation is not “one-size-fits-all” and requires cautious consideration of state-specific regulations. Companies need to stay vigilant and prepared for possible significant changes if broader bans on non-compete agreements are implemented.

Read the full CFO Brew article. Ms. Smolowe previously discussed this topic with Axios.